This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk01: Good day and welcome to the Bilibili 2021 Third Quarter Financial Results and Business Update conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Juliette Yang, Executive Director of Investor Relations. Please go ahead.
spk09: Thank you, Operator. During this call, we'll discuss our business outlook and make forward-looking statements. These comments are based on our predictions, and expectation as of today. Actual events or results could differ materially from those mentioned in today's news release and in this discussion due to a number of risks and uncertainties, including those mentioned in our most recent filing with the SEC and Hong Kong Stock Exchange. The non-GAAP financial measures we provide are for comparison purpose only. Definition of these measures and a reconciliation table are available in the news release we issued earlier today. As a reminder, this conference call is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on the Bilibili IR website at ir.bilibili.com. Joining us today from Bilibili Senior Management are Mr. Wei Chen, Chairman of the Board and Chief Executive Officer, Ms. Kali Li, Vice Chairwoman of the Board and Chief Operating Officer, and Mr. Sam Fan, Chief Financial Officer. And I will now turn the call over to Mr. Fan, who will read the prepared remarks on behalf of Mr. Chen.
spk05: Thank you, Julia. Thank you, everyone, for participating in our 2021 Third Quarter Results Conference Call. I'm pleased to deliver today's opening remarks on behalf of Midtern. Our strong third quarter's results once again demonstrate our ability to execute and deliver our growth strategy. In our peak summer season, we added over 13 million MAUs to our Bilibili community, bringing our total MAUs to 267 million, up 35% year-over-year. Mobile MAUs also rose to $250 million, and DAUs came in at $72 million, representing growth of 36% and 35%, respectively, both on a year-over-year basis. This solid growth makes us more confident than ever that we can reach our MAU growth target by 2023. Importantly, Our community is becoming more engaged and even thicker. Expanded video content across formats and scenarios drove an increase in users' daily time span on Bilibili, which reached 88 minutes in Q3, the highest we have ever seen in our operating history. This is particularly impressive and really shows the quality of our old and new users, given how fast we have grown. Other key operating matrix also grew substantially. Daily video views were up 77% to 2.3 billion. Monthly interactions were up 86% to 10 billion. And the monthly video submissions were up 80% to 10 million. Each of these matrix represents all time highs and reflects the health of our community, as well as the strength of the engine that powers our growth. Our effort to grow our user base while maintaining a strong and tight-knit community also had a very positive impact on our commercialization progress. Total revenues in Q3 reached $5.2 billion, up 61% year-over-year, beating the high end of our previous guidance. By matching the right content to our growing number of B2B users, more traffic was converted to paying users. MPUs reached 24 million in the third quarter, a 59% young year, and our paying ratio grew to 8.9%. Another factor driving our top line is our increasing appeal to business partners. This is particularly true for advertisers who are eager to gain visibility with the growing number of Gen Z Plus users on our platform. To reach an even broader number of users, last year, we redefined our brand proposition with a face or the videos you like. Today, more users recognize and view Bilibili as the go-to destination for high quality video content. In recent BrandZ report, Bilibili was ranked as the number two most valuable brand name in China in terms of growth rate. With increasingly recognition from advertisers across different industry verticals, our ad revenue grow by 110% young year in the third quarter. Even with microeconomic challenges, Looking ahead, visualization trends continue to surge, rapidly emerging as the preferred and new norm. As a premium video platform with broad content and community appeal, we expect to see continued benefit from the increasing visualization movement. Carrying out our solid strategy to expand our content, community, and commercialization We believe we are on the right path to becoming a valuable new gateway to the Internet. We have also strengthened our commitment to social responsibility. Using our public influence, we are further developing an inclusive community, promoting positive content and enacting better ESG practice. With that overview, I would now like to walk you through some details of our third quarter operations. I will begin with the first part of our 3C model, our content. The key to our user growth lies with our broad unmatched PUGBs. At the center of our video ecosystem, PUGBs continue to flourish, accounting for 93% of our video views in the third quarter. We have carefully created an extensive platform for high-quality content creators to be recognized, appreciated, and valued. We continue to improve our toolkit and services to lower barriers of creation, including our involving video editing app, BGM, as well as various creator support programs. In the third quarter, Monthly video submission hit a milestone of 10 million, up 80% year-over-year. The number of monthly active content creators also accelerated to 2.7 million, up 61% year-on-year. With our continuous efforts to improve our traffic distribution mechanism, content creators can flourish and attract fans more easily. In the third quarter, Content creators with more than 10,000 followers grow by 42% year-over-year. We continue to optimize and create new venues for them to realize their commercial value. These include our advertising matching platform, Sparkle, and the live broadcasting platform, bringing more commercialization opportunities to content creators at all levels. Our ongoing cash incentive program is also motivating an increasing number of mid-layer creators, encouraging their continuous content creation. By the end of the third quarter, 481,000 creators have benefited from this plan. Bilibili is home to thousands of interest-based content categories, and we are excited by our roadmap to keep building great new content for users in the third quarter. The top five populated POGB categories of lifestyle, game, entertainment, ATG, and knowledge continue to flourish and will welcome more users across various demographics. Other emerging verticals, such as fitness, food, and travel, are also gaining increasing interest. In addition to expanding content categories, we are also expanding our content formats to meet user different needs. For example, StoryMall, our short-form video content in our mobile app, offers quick on-the-go entertainment, which is designed to suit user fragment time. Conversely, our Bilibili app on Smart TV is the perfect solution for users seeking a high-quality, high-resolution, immersive video experience on a larger screen. We are encouraged by the strong momentum in user growth and the engagement and believe there is still a lot of room to grow ahead. For our OGV department, our OGV content reinforces our leading POGV verticals and introduces new ones to broaden our reach and our community's high-rises. Leveraging both our platform and production capabilities, our OGVs are helping drive created-in-China content. For example, Chinese Enemy can breathe new life into classic tales, helping Chinese culture resonate with young generations. In the second half of this year, we released multiple Bilibili-produced anime titles, including the second season of Mega Hits, Carbon Reborn , and Hundred Monsters , as well as The Daily Life of the Immortal King , all of which were immediately reviewed by anime lovers. Similarly, our documentaries and the variety shows are occurring within areas of young Chinese interest. These have achieved great success in promoting the Bilibili brand and building influence within these counter-verticals. Our self-produced matchmaking hit 19 Hunjie Suo is a good example that deeply resonated with our Gen Z Plus users and has given life to discussions beyond the Bilibili community. trending on social media platforms for weeks. We also released a music variety show, The Next Banner, or the 音乐年轻漫 in Q3. The show supplements our newer music content creations and appeals to music lovers in our community. In addition, we launched a series of self-produced, widely welcomed food scene documentaries with more to come. including the upcoming third season of The Story of Chuan , which reflects the growing interest in Chinese cuisine as well as the lifestyle categories. Turning to our community, our Shuyin community shows the quality of user growth. In the third quarter, daily video views increased by 77% year-over-year to 2.3 billion. and the monthly interactions were up 86%, reaching over 10 billion. Both metrics grow much faster than expected, and our users showed increasing engagement across our community. These interactions are the essential elements that make Bilibili experience so unique. At the same time, we are excited to see more casual users converting to official members by taking our unique community entrance exam. By the end of the third quarter, we grew the number of official members by 38% year-on-year to 133.6 million. For this co-user cohort, the 12-month retention rate remained above 80% in the third quarter, once again showing the strength of our community. Now, let's look at our commercialization progress. Our diverse revenue streams have become more and more balanced. While revenue from each of our segments grow in the third quarter, our advertising revenues have become our larger growth engine, followed by our vast and e-commerce offerings. Let's look at this in more detail within our commercialization segments, starting with our games. We see games as an advanced format of entertainment and a representation of cultural sub-power. Believing in the positive power of good games, our goal is to bring users more high-quality games both domestically and internationally, with a heightened focus on internal development. Leveraging our deep understanding of user preference and our rich game operating experience We are devoted to building our development capabilities for the new generation of players. At the same time, we are adamant from promoting exciting Chinese culture to large gaming world. Looking specifically at our third quarter game performance, revenue from our mobile games increased by 9% year over year to only 1.4 billion. We added three new titles domestically to a roster of exclusive licensed games or have been well-received by their followers. We also celebrated the fifth year anniversary of our legacy title, FGO, in September. Additionally, we successfully jointly published more premium games, including Tencent's League of Legends and the 90s Harry Potter, continuing to expand game offering in diverse genres. As for our domestic game pipeline, nine games have acquired approval and are ready for domestic release in the coming quarters. In the meantime, we are rolling out more Chinese game masterpieces to the global game market. Following our success of RE final year, 重装战机, we continue to build our distribution capabilities with the successfully launched our figure story, 章的手办团. in South Korea in September. The game became an instant hit, and we plan to replicate this success with more games overseas by leveraging our deep understanding of ACG lovers' tastes, our game selection know-how, and our strong distribution power. We are committed to operating responsibly to promote healthy game behaviors and protect teenagers from gaming addiction. As early as 2019, we launched anti-addition measures for team players and have continued to strengthen control mechanisms. By the end of August, all Bilibili-operated games fully compelled with the latest regulation on restriction minor gameplay time in China. We would also like to note that revenues from players under 18 accounted for less than 1% of game revenues in September of 2021. Turning to our vast business. Our vast business is the perfect illustration of our business-to-consumer B2C model. It represents our users' trust in our brand and the willingness to pay for B2B content and services. In the third quarter, our vast business continues to be our largest earner. reaching RMB 1.9 billion, up 95% year-over-year. Unlike any other live broadcasting platform, Bilibili Live Broadcasting has been uniquely integrated with our content ecosystem from day one. As a natural extension of video content, it amplifies our leading content verticals as well as the influence of our content creators. We continue to enrich our live broadcasting content during the period, providing more tools to facilitate our virtual host growth. We are excited to see the increasing influence of various game-like content from our community, including League of Legends, Honor of Kings, and the Kingston Impact. For example, we saw a record-breaking level of popularity for this year's League of Legends World Championship SE11 on Bilibili. On the final game night, the peak concurrent viewers increased by over 160% compared with S10, and we achieved the highest DAU ever in our operating history. We are also diversifying within more entertainment related offerings, especially for virtual uploader or VR related content. In Q3, We have triple digital year-over-year growth in both number of active VUPS and number of viewers in this category. We will continue to add and expand and strengthen our position as the world's leading virtual live broadcasting community. Thanks to our growing roster of high-quality OGVs and the users' tendency to pay for content, our premium members grow to 18.2 million by the end of the third quarter. an increase of 42% year-over-year. For ACG lovers, our comic and audio drama content continues to attract more paying users, again showing the high willingness of our users to pay for content they want and the vast potential that offers as we add exciting new content. As for our advertising services, Advertising represents our business-to-business B2B model and is also soaring. Despite microeconomic facts, our advertising revenue continues to be robust in the third quarter, reaching total advertising revenues of RMB 1.2 billion, an increase of 110% year-over-year. Our enhanced brand influence and our growing number of quality user functions as the building blocks of sustainable growth. As our integrated marketing campaign covers more industry customers, the creativity and the commercial value of our current creators is gaining wider recognition. More native ad videos went viral in Q3, making Bilibili the most sought-after platform in China for advertisers. We continue to promote our integrated marketing campaign and introduce more ad products to our inventory, helping our content creators monetize their talent. During the third quarter, our top five advertising verticals were mobile games, skincare and cosmetics, e-commerce, digital products, and food and beverage. As we move forward, we will continue to advance our growth strategy, and create value for our stakeholders. At the same time, we are committed to shouldering our social responsibility to make the world a better place, including supporting rural education, disaster relief, reducing our carbon footprint, and furthering green initiatives. Moreover, as a proud Chinese corporate citizen with increasing reach, We dream that one day, using art forms such as games, anime, and POGBs, we will be able to spread Chinese culture across the world. This concludes Mr. Chen's remarks. I will now provide a brief overview of our financial results for the third quarter of 2021 and outlook for the fourth quarter. Total net revenues for the third quarter will be 5.2 billion. up 61% from the same period of 2020. We continue to see a more balanced revenue mix driven by our diversified commercialization channels. Our total net revenue breakdown by revenue stream was approximately 27% mobile games, 37% VAT, 23% advertising, and 13% e-commerce and other business. Cost of revenues increased by 70% year-over-year to RMB 4.2 billion. Revenue sharing costs, a key component of cost of revenues, were RMB 2.2 billion, representing 83% increase from the same period in 2020. Gross profit increased by 34% year-over-year to RMB 1 billion, and our gross margin was 19.6% in the third quarter. Total operating expenses was RMB 2.9 billion, up 57% from the same period in 2020. Selling and marketing expenses was RMB 1.6 billion, representing a 37% increase year-over-year. The increase was primarily attributable to increase the channel and marketing expenses to promote our app and brand. as well as promotional expenses for mobile games and increase in our headcount in sales and marketing personnel. Q3 is our peak season in brand marketing and user acquisition efforts. We strategically allocated more resources and are pleased with the strong momentum shown in both user base growth as well as the quality of our users in terms of engagement levels. G&A expenses was RMB 474.9 million, representing an 87% increase year-over-year. The increase was primarily due to increased headcount in general and administrative personnel, increased share-based composition expenses, and higher rental expenses. R&D expenses were RMB 788.3 million, representing a 97% increase year-over-year. The increase was primarily due to increased headcount in research and development personnel and increased share-based compensation expenses. Net loss was RMB 2.69 billion for the third quarter of 2021, compared with RMB 1.1 billion in the same period of 2020. Adjusted net loss, which is a non-GAAP measure that excludes share-based compensation expenses, amortization expenses related to intangible assets acquired through business acquisitions, income tax related to intangible assets acquired through business acquisition, and the loss of fair value change in public trade companies was RMB 1.62 billion compared with RMB 0.97 billion in the same period of 2020. Basic and diluted net loss per share was each RMB 6.90. Adjusted basic and diluted net loss per share were each RMB 4.16. As of September 13, 2021, we had cash-to-cash equivalents, time deposit, as well as short-term investment of RMB 24.4 billion, compared with RMB 12.8 billion as of December 31, 2020. Our sufficient cash reserve gives us great confidence in our ability to execute our growth strategy, which we believe will yield considerable return in the long run. With that in mind, we are currently projecting net revenues for the fourth quarter of 2021 to be between RMB 5.7 billion and RMB 5.8 billion. Thank you for your attention. We would like now to open the call to your questions. Operator, please go ahead.
spk01: To ask a question, you will need to press star 1 on your telephone. To withdraw your question, please press the pound or hash key. For the benefit of all participants on today's call, if you wish to ask a question to management in Chinese, please immediately repeat your question in English. Please limit your question to one at a time. If you wish to have follow-up questions, please rejoin the queue. Please stand by while we compile the Q&A roster. Our first question comes from the line of Alex Boon from Morgan Stanley. Please go ahead.
spk03: My first question is regarding user growth. The user growth in Q3 has exceeded previous guidance of 260 million, and also the time spent has reached a record high of 88 minutes per user per day. So I wonder if management can explain what have we done in Q3 to achieve these results? And in Q4 and next year, what are our expectations? Thank you very much.
spk06: For so many years, the principle of B站 in terms of user growth has not changed. We are a content ecosystem that is healthy and positive. and generate high-quality content to drive the growth of the number of users.
spk09: So for all these years, the principle for Bilibili to grow our users has remained the same, which is driven by a very healthy content ecosystem. And those content ecosystems will continuously produce high-quality content to attract users.
spk06: Of course, every year we will have So every year we'll have evolved
spk09: emphasized area. For example, last year it was all about expansion and content categories. And for this year, beside expansion of content categories, we also hope to achieve expansion of consumption scenarios. Building a multi-scenario, multi-content category video community is our goal.
spk06: So I have always
spk09: thought that video's main battlefield is beyond just mobile phones, although nowadays mobile phone is the main consumption scenario. However, I think as the technology evolves, such as the 5G adoption and the overall hardware's involvement, in the future, more and more screens will carry the purpose of running a video, for example, on a larger screen.
spk06: So right now, our OTT Smart TVs MAU has surpassed our MAUs on the PC side, becoming our number two user component. And I still think...
spk09: plenty of room for us to forward and in those areas.
spk06: So not only that we have more users on the smart TV side, actually the time spent on the smart TV is also much longer than the rest of the terminals. B站肯定是国内 4K video is the most popular platform. I think this is also the reason why Bilibili is suitable for watching on TV.
spk09: Bilibili probably has the most number of videos that is in 4K. And that is also the reason why Bilibili's content is most suitable for those larger screens.
spk06: For example, this year we also launched our story mode. Another example would be our story mode. Within the story mode, our content creator can upload videos that's in the horizontal mode, which was also well loved by our users.
spk09: And within that scenario, our users can enjoy those quick, on-the-go entertainment content.
spk06: Okay. This is a strategy for the growth of this year's full-scale scene. What I would like to emphasize is that Q3's data is not only good for the users, but I think the quality of our users, which is reflected in the middle, should be paid more attention.
spk09: Here I wanted to point out that in the third quarter, we not only have a fast-growing number of user base, the quality of those users are also very, very good. For example, the time spent, 88 minutes, is the highest we've seen in our operation history. And also the user engagement engagement number also experienced a very fast growth. All of those indicate that we have grown with quality. That's very important. Our monthly user interactions, average monthly user interaction in Q3 has reached 10 billion milestones.
spk06: And also on the paying conversion in Q3, our paying user reached 24 million and our paying ratio continues to rise, reaching 8.9% in the third quarter. I remember when I was in 2017, I predicted that Bilibili would be able to break the two-digit number. I still see it that way. Although our users grow very fast, I think the quality of our users is very high. So after these people like our content, they will be willing to pay for our content. And the final growth of a paid number will be even higher than the growth of a user.
spk09: Back in 2017, I predicted that Bilibili's paying ratio could reach double digits, and I still believe that. Even though our users are growing extremely fast, the quality of the user is also extremely high. Those users love our content and are very willing to pay for this content. We believe in the end of the day, the revenue generated from our users will be faster than the increase of our users' number.
spk06: For Q4, according to the trend of Bilibili every year, we predict that the number of users for Q4 should be stable, which is greater than or equal to Q3. As for Q4's outlook,
spk09: Similar with our traditional seasonality, we expect Q4 user space to be stable or a slight increase. As for our user target for 2022, we raised our three-year MAU target of 400 million users by 2023. And for next year, we will continue to execute on that strategy and to step-by-step achieving that target, and we are still very, very confident to be able to achieve that user goal by 2023. 其实可以稍微补充一下这个TV端的一个比较令我们超出预期的数据。 本身的话,我们认为B站的用户的渗透,我们一起会讨论究竟到多少吗?
spk07: In fact, we see a number of data on the TV side, we are 20% lower than the users on the app side. Most of its users are still in three, four, five-line cities. This completely differentiates the activity of the users, which makes us more confident in forcing the current content reserves to change in the future products, including changes in many scenarios. There should be a lot of room for infiltration growth in the users.
spk09: One thing I would like to add is about our smart TV users. And originally we thought this TV user versus our app user would have relatively higher overlap. As a matter of fact, the overlap is only about 20%. And a lot of the smart TV users are users coming from third, fourth, and fifth tier cities. So these differences give us great confidence in terms of further penetrating our target cohort, and we believe with Bilibili's fast content library and the evolving scenario, we should be able to achieve our user target.
spk01: Thank you. Our next question comes from Daniel Chen from JP Morgan. Please go ahead.
spk02: 我们有没有看到一些外部的因素 比如说宏观的经济的情况 还有就是这个数据安全这块的政策 对整体广告的影响 谢谢 I will translate myself My question is related to advertising So we have seen such a strong growth in the third quarter Triple digit year-over-year growth So what's our expectation into the fourth quarter of this year And also 2020 And also, are we seeing the impact from like a weak macro environment and also like a data security policies? Are we seeing those implications to our advertising revenue? Thank you.
spk07: Q3的话,我们广告的收入其实达到了11.7亿,同比增长超过110%, It has achieved growth of more than 10 seasons in a row.
spk09: In Q3, our ad revenue reached $1.17 billion, up over 110% year-on-year. This is the 10th effective quarter of exceeding expectation level of growth.
spk07: We have repeatedly discussed the theory of billability.
spk09: our business logic and our efforts in building our infrastructures as well as strategies in the past few quarters, which I will not go into further details this time. However, I will share some of the data and new changes we've seen so far in the fourth quarter and also in the third quarter.
spk07: First of all, we see continuous improvement in our ad efficiency
spk09: Thanks to our deep learning models' involvement, as well as the further adoption of more innovative ad scenarios, the click-through rate of our feed ads improved by 30%, and we expect this will further drive our fourth quarter and next year ad revenue growth.
spk07: The second is the number of scenes in the ads. As I mentioned earlier, the number of scenes in the ads is also connected to the number of scenes that our users have grown. In fact, from the cover of mobile apps, iPads, TV screens, and PC screens, we have also opened up new scenes of in-line, story, and dynamic videos. In the future, as our users grow, our users can see where our ads are, and our ads can also follow them.
spk09: Second is we further integrated multiple ad scenarios, as Razel mentioned, from our mobile app on our mobile phones to iPad, Smart TV, and PC. We continue to add new ad inventory, including ad products like inline stories and moments. And as our user continues to expand, our ad can follow.
spk07: Q3, at the same time, the third point, Q3, more than 1.5 million ARP owners invested in Huahua, with a growth of more than 25%. The other data shows that the brand's return rate is still more than 75%. The creative content of Bilibili's high-quality ARP owners has actually become a new marketing benchmark for the entire Internet market. The third point is on the Sparkle ad platform, we have over 150,000 content creators joined.
spk09: This is up 25% year-on-year. And we also have repetitive ad customers over 75%. And Bilibili's content creator produced more and more highly creative native ad content and is becoming the new beacon in China ad market. And we'll continue to build on that success and further to integrate our one-stop solution of native ads, brand ads, feed ads, including our project Takeoff, which all have been widely acknowledged in the ad industry.
spk07: 第四个点可以分享,就双十一时间, 我们的日消耗突破2500万, 电商的预算份额在全网在第五, 就转化的ROI的逻辑来说是在全媒体的第一。 And the fourth point is during this year's singles day, our daily ad GMB were over RMB 25 million, ranking number five in terms of ad budget market share.
spk09: and the overall conversion ROI ranked number one in the space. This further proves the high quality of our user and their potential consumption power. We expect next year in the overall consumer advertising industry will continue to raise our performances and achieve greater success.
spk07: The fifth point is to talk about customer expansion. In the customer industry, in addition to our traditional advantageous areas such as games, food and drinks, 3C digital, etc., in fact, this Q starts the industry of cars, clothing, shoes, bags, etc. in Bilibili to achieve more than we expected. At the same time, the sixth point is that it is expected that our advertising video will also further drive the improvement of advertising efficiency. We will improve a temporary video experience. There is a very obvious data in Q3 that will see that the advertising efficiency of video form will double the current pattern form. The price of the entire eCPM will also get a more eCPM estimate will also bring more than 100% improvement.
spk09: And the fifth and the sixth point is, first of all, on our ad clients, besides our traditional strong vertical like game, food and beverage, 3C, skin care and cosmetics, we see emerging verticals such as automotive, handbag and apparel are also growing rapidly. Last but not least is on our, we see new format of video-based ads as also driving the improvement of our ad efficiency and forming one-stop ad solution on Bilibili. Our Q3 number shows that video-based ad is two times more efficient than the traditional picture and text-based ads. and we expect the ECPM will have the potential to further grow by 100%. So lastly, on whether there's going to be impact of the recent data security regulations, we don't think there will be any visible impact to our app business. And we still have confidence to deliver healthy and fast growth in our app segment in Q4 and in next year.
spk01: Thank you. The next question comes from the line of Brian Gong from Citi. Please go ahead.
spk04: 管理層晚上好,謝謝接受我的提問。 就是我們的生態呢,包含了這個遊戲視頻直播, 而且本身就是一個虛擬的社區。 所以Bili看起來應該是中國互聯網領域裡 比較符合元宇宙趨勢的一個主要平台之一。 所以想請問一下管理層, 我們有沒有計畫在元宇宙這方面進行佈局, 以及... I will translate myself. Our ecosystem covers gaming, video, live streaming, and actually we already have a virtual community. BD seems to be among those key platforms in China that could explore metaverse opportunity. So my question is that how does measurement see BD's position in these things, and how will BD to seize this opportunity? Thank you.
spk06: When I had an investment meeting in July this year, I gave a point of view. I said that the original universe is a concept, it is not a product. This concept includes some elements of the product. For example, virtual reality. For example, a close social system. For example, an eco-system of self-circulation in the game. In fact, these elements are not new. As I mentioned in my investor conference earlier this year, metaverse is a concept, it's not a product. And before this concept emerged, actually many of the elements
spk09: with metaverse already existed, whether it's virtual reality, a tight social community, or a system, social system, or self-reinforcing ecosystem. It's already existed, and there are a lot of companies already developing products on those concepts. For example, Facebook and Tencent, and actually Bilibili is one of them.
spk06: So if we listen to the concept of the original universe now and then announce the layout or entry into the original universe, I think they should be too late. Because of these elements, like I just mentioned, whether it is the social system or the internal ecosystem, it is not a few months or even a year or two to do it well.
spk09: So that's why I think that if someone hears the concept of metaverse and decided to get into this business, probably would be a little bit too late. That is because those elements such as social system, self-reinforcing ecosystem, all of which cannot be done in a couple of months or even in years.
spk06: I think in the concept of the original universe, there is a very important thing, which is that it needs a self-circulating content ecosystem. I think the concept of the original universe, the product it talks about, it can't be done by a single company, because there is no company that has such content capacity. And I believe there's a very, very important element within the metaverse concept, which is the self-reinforcing content ecosystem. When we talk about metaverse,
spk09: We think this is not something that can be done by a singular company. You need to have massive content production capability to produce another world. So that's why we believe it requires someone deeply connected into this system. And through creating content, they will achieve benefit. responding tighter, even tighter within the system itself.
spk06: 让一大群创作者在体系内创作内容, 并且让这些创作者通过内容获利, 这其实就是B站的生态一直以来秉承的理念。 比如说这个,我举个例子吧, 像我们的这个虚拟主播, Our virtual anchor is actually such a case. Our app owners use the action capture technology to become another character in another world. And these characters can sing, dance, act, and talk. The content of these virtual characters will be supported and liked by many users. In fact, this is an example of ecosystem in the system.
spk09: And Bilibili has a very large base of content creator or creating content in Bilibili system. And they're benefiting from this creation process that makes Bilibili the ideal platform to further explore in this metaverse concept. Actually, this is something Bilibili has always been practicing and believed in. And we have many examples linked to this concept. For example, virtual uploader. Our content creator can leverage technology like motion capture, virtual reality, augmented reality, turning themselves into another character in another world, and creating content such as singing and dancing, talking jokes, all of that, attracting users. and make user fall in love with them. And itself, it is a perfect example of implementing the creation system into this metaverse concept.
spk06: If there is really an infinite and wide world described in the original universe, and there are millions of people, millions of people, or even billions of people in this world, then it will definitely require a lot of creators, more than there are now in Bilibili. When we're talking about metaverse, independent, separate,
spk09: universe that attracts hundreds of millions of users who are getting attached to this. It requires way more than what we have now, those content creators to continuously create content and keep them attracted. And that's the exact reason why we believe the metaverse requires self-reinforcing, deep content creation ecosystem.
spk06: Currently, Bilibili already has a set of excellent creative ecosystems. And around this ecosystem, we have already formed a large community of more than 2.7 billion people. And most of these 2.7 billion people are the most creative and active young people in China. So I do think
spk09: Bilibili has the very outstanding and healthy content creation ecosystem. And surrounded that ecosystem, we have already attracted a tight community of over 267 million MAUs. And within that 267 the 67 MAUs, a vast majority are the most creative, most energetic young Chinese. So that's why I do think Bilibili is probably one of the best companies to practice or to get into the metaverse business.
spk06: But I think the original universe is still a long-term goal. To be honest, all the discussions about the original universe However, I do think metaverse is a concept in a long time horizon.
spk09: And it's also a future objective. We've must heard a lot of discussion about metaverse, but I think it's mostly on a capital level or on a media level. I rarely heard anything on a product level because it does require breakthrough in product and technology. So that's why I do think this is still far ahead, but it's The future. I do believe this is a very, very beautiful vision in the future. It brings elevated user experience. The scenes that we've seen in the movie Ready Player One or in the anime Sword Art Online, this metaverse concept does bring a very beautiful experience to users.
spk06: I saw some media articles He really used this player to criticize the concept of the original universe. He said that the world played by this player is problematic. But this is how I see it. I think technology itself is just a tool. People are the motivation. People have decided whether a tool can benefit society or bring negative value to society. I think the original universe brings us a broader imagination space and one more choice. One more choice is always good. After the TV, you can still watch cartoons and movies, but you have one more choice to watch TV. After the mobile phone, you can still watch TV, but you have one more choice to watch mobile phone. A while ago, I went to Shanghai's Tianwen Pavilion. I went to see it. It is said to be the best Tianwen Pavilion in the world. After I went to see it, I found that there are a lot of scenes in it. If you use virtual reality, if you use the experience of the original universe, it can be done better. After all, only children in Shanghai can go to the Tianwen Pavilion. If we can really realize an original universe through the Internet, there is a Tianwen Pavilion inside. I really can let all the children in China go to see the light ring of the sun, Mars and Saturn, and look at the comet. So I think it's a technology that makes people addicted or make people gain knowledge. The key is to see what kind of people are using this technology.
spk09: I read a recent report, media report, criticizing metaverse using examples like movie Ready Player One. However, I disagree. I believe technology is tool. It's the person that matters to make this tool to be beneficial to the society or make bad influence on the society. And metaverse represents a new choice, not a replacement of the existing reality. It's always good to have an additional choice, such as the invention of television and the invention of mobile phones. It provides an alternative for you to choose not to replace the old thing. And I recently visited the Shanghai Auditorium, auditorium that has the space museum. And actually a lot of the things that are in the museum can be achieved in a much greater effect in virtual reality or in the metaverse. Let's imagine all those things that you see in the auditorium and in the museum. can be spread in the internet, allowing all the children, all the kids in China to physically see, get a touch of how the sun is looking like, how the Saturn is looking like. So I believe it will bring great benefit to the society. It really depends on the people itself.
spk01: Thank you. The next question comes from the line of Lei Zhang from Bank of America Merrill Lynch. Please go ahead.
spk08: Hi, Manager Chen. Thank you for accepting my question. My question is mainly about the live broadcast business. I noticed that when we were doing SI in China, the views and results of Bilibili were very good. Thank management for taking my question. My question is mainly regarding live streaming business. Notice that we have a good performance in S11 recently. So looking forward, how should we look at your live streaming service? business, especially in content and monetization strategy. Thank you.
spk09: Indeed, for this year's S11, on the final game night, we have record high peak concurrent user, and our platform's DAU also reached record high in our operating history. I discussed this with our internal team and we are predicting that Bilibili's S11 final game night probably has the highest peak concurrent user in China's live broadcasting history, internet live broadcasting history.
spk06: 而且的话,我特别想说的是, S7的直播并不是一个单向的一个, we give the content to the users. During the entire S-Side period, a large number of streamers are actually streaming content related to S-Side. And we have a large number of video headings that are also downloading content related to S-Side. The number of headings of these app owners related to S-Side is more than 280 million. What does this actually mean? This means that for a community like Bilibili, At the same time, I want to emphasize that the SC11 is not a one-way content output. Actually, during the SC11, we have massive live broadcasting hosts doing S-game-related live broadcasting.
spk09: We also have tons of content creator creating derivative content associates with SE11. For those videos alone, we have total video play over 2.6, 2.8 billion times. And all this data points support the argument that Bilibili's live broadcasting is a natural extension of our video community And it is forming a self-reinforcing ecosystem or a positive feedback loop within our community.
spk06: Yes, I think S-Side is just an example. In fact, I think even without S-Side, the whole of Bilibili's live broadcast, from the perspective of the health of data and ecology, its development is very positive. A few years ago, some investors may ask me, why is Bilibili a video website? Why do you do live broadcast? At that time, I would answer, I said, I think live broadcast is a kind of ability, it is not a category. I think live broadcast is one of Bilibili's I think now, even without SCI, for example, if we look at the content of B站, for example, if we look at the live broadcast of the game, for example, if we look at some of the live activities of the original god here, And it
spk09: Years ago, an investor would ask me why Bilibili would do live broadcasting. My answer was live broadcasting is not a content vertical, rather a capability. And for Bilibili, it's an important component of our content ecosystem. With or without S11, our live broadcasting has already deeply embedded into our video community. For example, we see tons of knowledge, lifestyle, and entertainment-related live broadcasting provided by our content creators. And we believe this has really integrated in our community. And live broadcasting on Bilibili is spreading its wings and making multiple times of influence and impact to our content community. 其实对于B站的直播来说,我觉得它也打破了过去很多人对于直播的一个定时思维。 过去很多人一提到直播,他就想是不是直播就是秀场,是不是直播就是电竞的直播。
spk06: But in fact, when we look at Bilibili, we will find that Bilibili has many types of videos, and it has many types of live broadcasts. There are live broadcasts for learning, live broadcasts for life, and live broadcasts for cooking. Moreover, these live broadcasts are established in a positive cycle. For example, we will find that users who watch music also watch live broadcasts of music. Its creators are also connected. For example, the creator of video games can also play video games. And he also encourages the cross-border. For example, we have a very famous game streamer here. What does he do when he makes videos? He makes food. He's a big brother. He makes food when he makes videos. But his live broadcast is a live broadcast of the first few people. This actually expands the creator's creative route. And the most important thing is that I think live broadcast is a healthy way for creators to make a profit. No matter how good your video is, your video is actually anti-human to the user. I don't think it's reasonable. But everyone likes to watch a person's video, and then the author starts a live broadcast, and he does some interactive activities. So people who like him can, for example, through the live broadcast, I can buy his book, or through the live broadcast, I can also participate in his activities, give him a reward, and express my love for this anchor. I think the whole live broadcast is now fully integrated into the ecosystem of Bilibili. And this kind of chemical effect produces more and more interesting phenomena.
spk09: Again, I think Billy Billy's live broadcasting is actually breaking a lot of people's stereotypes about live broadcasting. In the past, when people start thinking about live broadcasting, it is showroom or esports. However, for Billy Billy's live broadcasting, our content category covers a wide array of verticals, basically what content verticals we have on the video platform, we have it on live broadcasting. And most importantly, we are forcing layers of positive feedback loop in terms of content verticals and as well as our content creators. For example, our content creator in games, they can also do games related live broadcasting. And we're also helping our content creator to expand their content creations category. For example, there's a food content creator who's also very good at playing games. He's actually ranking the top live broadcasting host in the Junson Impact content creator. And most importantly, I do believe that live broadcasting is a very healthy mechanism to help our content creator to make money. For example, to charge people from watching videos, it's probably not the best monetization method. But if you love a content creator so much, you would be very willing to watching his live broadcasting, buying his recommended product, or just simply tip him to showcase your appreciation. And that's also the exact reason that we believe that live broadcasting is a very important component within Bilibili's community. And this chemistry that is playing in the community is creating a very large benefit to all the participants.
spk06: I think for the future of our live broadcast business, first of all, we will follow the current ecosystem, which is equivalent to the idea that we need to fully integrate live broadcast and video. Because this can maintain the health of our live broadcast industry. Other than that, there are two other things that I think are important. The first one is the interaction between the uploader and the streamer. I think this is an important point. Because I always think that all video users should be streamers. This is also a goal that allows us to better integrate video and stream together. The second one is that I think we still need to explore Some of the live streams that are really suitable for Bilibili, some of the live streams that can really grow on Bilibili. Because the reason why our video user growth is because we have opened up a lot of new categories, and these new categories are not available on other platforms. For example, from the previous ghost tree to the knowledge-based video in the back, there are no other platforms. This is what we have opened up. And as we look ahead, we'll continue to implement our content ecosystem-driven business model, continue to integrate live broadcasting with our video business. We'll continue to...
spk09: penetrate the two user groups, content creator and live broadcasting host. And also, we do believe that all the video users could potentially become live broadcasting users. Secondly, is that we're willing to discover and develop Bilibili's unique live broadcasting categories. I think one of the reasons that our, Our video platform is so successful is that we have our own unique content category, such as auto to remix and knowledge sector. Those content verticals are Billy Billy's has Billy Billy's unique taste to it. And so is what we plan for our live broadcasting business. We want to develop our own unique content categories. that has billability flavor to it.
spk01: And that concludes the question and answer session. I would like to turn the conference back over to management for any additional or closing comments.
spk09: Thank you once again for joining us today. If you have any further questions, please contact me, Julia Yang, Billability IR Director, or TPG Investor Relations. Our contact information for IR in both China and the U.S. can be found on today's press release. Have a great day. Bye-bye.
Disclaimer